Flipkart CEO Binny Bansal & head of commerce and advertisement platform Kalyan Krishnamurthy believe that while the company has been specifically innovating for the Indian market, Amazon has taken to replicating some of its strategies.

Amazon’s cash-fuelled and copycat India strategy is flawed, a combative Flipkart chief executive Binny Bansal said, insisting only innovation and not multi-billion-dollar war chests can provide the answer to building a successful e-commerce business in the country.

Bansal and Kalyan Krishnamurthy, Flipkart’s head of commerce and advertisement platform, said in an exclusive interview with ET that while the company has been specifically innovating for the Indian market, Amazon has taken to replicating some of its strategies.

“Cash is like a drug, and when you start solving problems with cash you get addicted to it. It’s hard to get out of that addiction,” Bansal said.

Both companies have generously used this capital to chase growth and win customers but are receiving flak lately for employing a strategy that can’t sustain the businesses long-term.

Flipkart lost $65 million-$70 million a month in financial year 2015-16, according to sources familiar with the company’s financials. Its cash burn rate has dropped to $35 million-$40 million a month this fiscal year, while Amazon India is presently losing $80 million-$90 million a month.

Edited excerpts:Q: How has 2016 been for Flipkart?

Bansal: The year has been eventful, to say the least. It’s been a year of turnaround. We have made a lot of progress - lots of hits and a few misses, probably.

In the last three months, growth and organisational momentum have come back. From August, we started investing in growth after Kalyan (Krishnamurthy) joined us in July. We had a great (Big Billion Day, or BBD, sale).

November was looking really good for the first seven days, before the Prime Minister decided to put a little bit of a spanner on one side of the business (commerce) and accelerated the other side of the business (payments, PhonePe). This month, we are almost back on track.

The whole organisational momentum, the mojo and belief is back in a big way.

Krishnamurthy: We grew this year on fundamental and unmatched capabilities. Look at the big categories in which we play in today, like fashion, appliances and televisions, and phones. In fashion, we have become a very clear destination in India with 75%-80% market share.

In appliances and TVs, we are the only player in the country with post-transaction servicing capability, which is an integral part of the category. In phones, we have been creating the market since Flipkart was founded.

This year, we have introduced affordability with low-cost EMIs and product exchanges. It’s been a year of defensible and capability-driven growth.

Q: Can you quantify how your affordability initiatives have been key to growth?

Bansal: Before we launched affordability, our market share in mid-range smartphones (Rs 8,000-Rs 20,000) was very high at 30%-40%.

In higher-end phones (above Rs 30,000), our market share was about 5%. With these innovations, higher-end phones have become really affordable and you can buy an iPhone 6 on Flipkart for EMIs of Rs 1,500-Rs 2,000.

Q: What are you planning for the grocery and daily essentials category?

Bansal: We will do a pilot, or pilots. But we are very serious about the category and have a long-term view on it.

We believe we are now at a scale where it can be built in a sustainable way, which is through innovation. (Otherwise) it’s easy to build it by burning a lot of capital.

Q: But Amazon India has spent more than $1 billion in the last 12 months and says it will ramp up investment further in 2017. In this environment, how hard is it to build a sustainable business and keep market leadership?

Kalyan KrishnamurthyKrishnamurthy: That is not how we think about the business. We think about consumers, innovations and capabilities.

Take a look at the last 10 years and then the last three years since competition entered the market, and make a list of innovations in e-commerce and who has led them.

If you have to operate in a country you have to give consumers something. People have done two things - they had a global playbook somewhere and started pasting that here. It was not something that Indian consumers desired.

Number two, copying us. We took a forward-looking view that the country will do commerce on mobile devices. They do that even today.

We came up with the construct of BBDs, they copied that. We went with product exchange and affordability programmes; when they talk about it they will not give you an affordability story. I am not even talking about fundamentals like cash-on-delivery or having a last-mile delivery fleet like ours, which are big things.

When we have a bank offer, they have it as well. On Flipkart, you get instant cashback, but on their platform you get it after four-and-half months. They copy everything, or they wait for someone from somewhere to tell them what to do. Just by pouring money into the market you cannot get anywhere.

Bansal: Cash is like a drug, and when you start solving problems with cash you get addicted to it. It’s hard to get out of that addiction and you are running on a cliff.

Then you will say is it working for you or not? The moment you have that doubt you fall off the cliff. I think that’s the way we look at it. You can do it for some time but doing it continuously is not possible. Innovation is the only answer, and as long as we keep innovating we are fairly confident.

Krishnamurthy: BBD or the festive season was a good example. We saw them being helpless. They did things which even their other counterparts in the world don’t do - severely compromised on customer service because they wanted to give an answer to us. If you innovate and do something local, that’s where their game ends.

Q: But Amazon has executed that strategy in the US against Zappos and Diapers.

Bansal: That is the absolute wrong analogy. This is not the US. The right analogy will be Amazon competing with Alibaba in China or Rakuten in Japan. They have been competing for ages and they haven’t become market leaders in those markets.

We own the three biggest segments of the ecommerce market—mobiles phones, fashion and appliances. We have sustainable differentiators on those, and we have not won them because of capital. It’s a very different ballgame, and that game Amazon has not won anywhere.

Q: How do you communicate to investors your ability to retain market share in the face of Amazon’s war chest?

Krishnamurthy: Our investors don’t talk about just investing. They ask us about what capabilities we are building for the next 3-5 years, why will a customer choose us and how are we taking this market from a 70 million-80 million user base to 200 million. These are the questions we are asked and not who is spending where and how much.

Q: They must be asking about market share.

Krishnamurthy: And we have very good answers: October, November and December. Nothing has changed since October in terms of market leadership. And in December, we had two flagship launches of Moto and Lenovo. Clearly, we have gained market share over the last two months.

Q: What will you two be focusing on in 2017?

Bansal: I am more focused on the larger picture for the group, working with Myntra and PhonePe. As for Flipkart, I am working with Kalyan on product, tech and overall strategy, besides talent and culture.

Since the reorganisation in August, the idea has been to focus on group-level stuff. PhonePe will be integrated with Flipkart soon. Kalyan has been focusing on executing the business.

Krishnamurthy: My skillsets are more execution-driven so I have been focused more on pure category management.

I am also closely involved with marketing, where we have a different strategy now, as you would have seen during BBD. We did not take a spend approach, but more of an integrated approach and 360-degree view.

Bansal: We were able to do better than the competition with one-third of the investment.

Q: Kalyan, why did you leave Flipkart in 2014?

Krishnamurthy: When I came in (in 2013) it was an informal arrangement that I would bring certain skillsets to the table, and I would help recruit for those skills as well. We exactly followed that.

I think I overstayed a little bit. We kept in touch throughout 2015 as Flipkart kept investing, and Binny is a mentor to the entire country’s ecosystem, so we kept exchanging notes.

Q: So this time are you here for good?

Krishnamurthy: Yeah.

Bansal: Yes, this time it’s different. This is more about building Flipkart for the next stage and taking it to the next level. So it’s more of a partnership.

Q: There is speculation that Bansal will leave Flipkart and Kalyan will take over as CEO.

Bansal: I don’t know how to leave this company.

Krishnamurthy: A founder brings an intuition and a sixth sense to the company. All of us run the business from an analytical point of view but Binny brings that unique view that someone hired into the company will not have. You have a unique sixth sense about your kids. So Binny is not leaving.

Bansal: The way Sachin (Bansal, executive chairman) and I look at the business organisation is that there is a higher purpose—to change the way commerce is done in India.

The other major purpose is how do you create a technology powerhouse out of India, which is hard work and will probably take another 10 years. These two pieces keep us going.